Birdsong et al v. The Lincoln National Life Insurance Company et al

Filing 57

ORDER granting 40 Motion for Summary Judgment; denying as moot 47 Motion to Strike for the reasons stated in the order. A judgment will be entered in a separate docket entry to follow. Signed by District Judge Daniel P. Jordan III on October 17, 2012. (SP)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
WILLIAM E. BIRDSONG, et al.

PLAINTIFFS

V.

CIVIL ACTION NO. 3:10cv699-DPJ-FKB

THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY, et al.

DEFENDANTS

ORDER
This diversity case arises out of Plaintiff William E. Birdsong’s purchase of several lifeinsurance policies. The matter is before the Court on Defendants’ Motion for Summary
Judgment [40]. Also before the Court is Defendants’ Motion to Strike the Affidavit of Robert
Mims [47]. Because Plaintiffs’ claims are time-barred or otherwise legally insufficient, the
motion for summary judgment will be granted. The motion to strike is moot.
I.

Facts and Procedural History
In mid-1991, Birdsong’s high school classmate and longtime insurance salesman Robert

Mims suggested that Birdsong, then 55 years old, switch from his existing life-insurance policies
to Chubb Ultraspan 2001 policies. Birdsong ultimately purchased four Ultraspan 2001 policies
based on Mims’s alleged representation that if Birdsong paid premiums for eight years, the
policies would fund themselves until he reached age 95. Mims supposedly promised that the
policies would self-fund through a non-guaranteed bonus feature, which returned a portion of the
cost of insurance to the policies’ cash values at the end of the tenth policy year and every five
years thereafter. By the time the policies reached their fifteenth anniversary, Defendants had
reduced the amount of the bonuses.1 According to Birdsong, the policies therefore failed to
1

Defendant The Lincoln National Life Insurance Company acquired Chubb’s rights,
duties, obligations, and liabilities under the subject policies.

perform as Mims promised they would, so Birdsong filed this lawsuit on November 1, 2010.
Additional Plaintiffs include The William E. Birdsong Trust, which owns one of the policies, and
Birdsong’s children, Margery B. McCullum, Christopher L. Birdsong, and Virginia B. Culp, who
own another policy. Plaintiffs assert state-law claims against Defendants for bad-faith breach of
contract, fraudulent inducement, negligent misrepresentation, negligence, gross negligence, and
breach of fiduciary duty. Notice of Removal [1] Ex. A, Compl.
In their motion for summary judgment, Defendants argue that Plaintiffs’ claims are
untimely and otherwise unsupported by the evidence in the record. Following the initial round of
briefing, the Court requested supplemental briefs to address the application of Mississippi’s
borrowing statute and how it determines where Plaintiffs’ claims accrued. Those issues have
now been addressed by the parties. The Court has personal and subject-matter jurisdiction and is
prepared to rule.
II.

Standard of Review
Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil

Procedure when evidence reveals no genuine dispute regarding any material fact and that the
moving party is entitled to judgment as a matter of law. The rule “mandates the entry of
summary judgment, after adequate time for discovery and upon motion, against a party who fails
to make a showing sufficient to establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986).
The party moving for summary judgment “bears the initial responsibility of informing the
district court of the basis for its motion, and identifying those portions of [the record] which it
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believes demonstrate the absence of a genuine issue of material fact.” Id. at 323. The
nonmoving party must then “go beyond the pleadings” and “designate ‘specific facts showing
that there is a genuine issue for trial.’” Id. at 324 (citation omitted). In reviewing the evidence,
factual controversies are to be resolved in favor of the nonmovant, “but only when . . . both
parties have submitted evidence of contradictory facts.” Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994) (en banc). When such contradictory facts exist, the court may “not make
credibility determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., Inc.,
530 U.S. 133, 150 (2000). Conclusory allegations, speculation, unsubstantiated assertions, and
legalistic arguments have never constituted an adequate substitute for specific facts showing a
genuine issue for trial. TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir.
2002); Little, 37 F.3d at 1075; SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993).
III.

Analysis
A.

Motion for Summary Judgment
1.

Statute of Limitations

The parties have been well-represented by capable counsel, and as their memoranda
demonstrate, the case presents many potential issues raising difficult questions of first impression
in Mississippi. Ultimately though, the Court concludes that no matter which path you travel, you
reach the same point—the non-contract claims are time-barred.
Before exploring those paths, a summary of the holdings may assist. To begin with, the
parties address choice of law between Mississippi and Alabama because Mississippi has a threeyear limitations period whereas Alabama employs a two-year period. Compare Miss. Code Ann.
§ 15-1-49(1), with Ala. Code § 6-2-38(l). This question initially is a red herring because statutes
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of limitations are procedural in this context and Mississippi would apply its own law. Zurich
Am. Ins. Co. v. Goodwin, 920 So. 2d 427, 432 (Miss. 2006) (citations omitted). Under
Mississippi law, the claim vested and accrued when Birdsong received policies in 1991
containing no reference to the promised bonuses. Birdsong was therefore on notice of his claims
at that time, and the statute expired three years later, some seven years before Plaintiffs filed suit.
Having said that, choice of law could re-enter the analysis if Plaintiffs are correct that
Birdsong first learned of his claims in Spring 2008—i.e., more than two but less than three years
before he filed. If so, the Court must consider Mississippi’s borrowing statute, which applies a
foreign state’s more restrictive statute of limitations to claims that accrued in that other state but
are time-barred in that other state. See Miss. Code Ann. § 15-1-65. The Court finds that the
borrowing statute applies and that if notice first occurred when Birdsong claims, his lawsuit
would still be delinquent under Alabama’s borrowed two-year statute of limitations.
a.

When the Claim Accrued Under Mississippi Law

Plaintiffs argue that Mississippi law must apply, but under that law the claim accrued in
1991 and is therefore untimely. There is no dispute that Birdsong’s agent, Mims, told Birdsong
there would be a bonus that would allow Birdsong to cease payments after eight years. Mims
described the bonus as “the next thing to a led [sic] pipe guarantee that I had ever seen in my
life.” Pls.’ Resp. [44] Ex. 2, Mims Dep. at 55. But as Plaintiffs’ initial memorandum concedes,
the contract Birdsong received in November 1991 did not reflect the bonus, so Plaintiffs attempt
to build their case on an implied obligation. Pls.’ Mem. [44] at 4.
The initial problem with this theory is that the contract included an integration clause that
stated, “The entire contract consists of this policy and the application (and any supplemental
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applications for additional Specified Amounts).” Defs.’ Mot. Summ. J. [40], Ex. H, Policies at
8. Similarly, the application, which was incorporated into the contract, expressly precluded
reliance on anything Mims may have said: “The agent has no authority to make, modify, alter or
discharge any policy or the terms of this or any other agreement with the Company.” Id. Ex. G,
Applications, at Mims.Subpoena000120. So the contract excluded any obligations reflected in
documents or representations made beyond the contract itself. See Stephens v. Equitable Life
Assurance Soc. of U.S., 850 So. 2d 78, 83 (Miss. 2003) (“Any alleged oral agreement in this case
does not have any effect on the written insurance contract.” (citation omitted)).
Equally important is the absence of any contract language referencing the non-guaranteed
bonuses. Under Mississippi law, “if an insured is put on notice by the plain language of the
policy that the agent’s verbal representations are false, a fraud claim accrues on the date of the
sale.” Weathers v. Metro. Life Ins. Co., 14 So. 3d 688, 689 (Miss. 2009) (citation omitted).
“However, ‘if the plain language of the policy does not clearly contradict the agent’s
representations such that the insured is put on notice, a fraud claim accrues when the insured
becomes aware of the misrepresentation.’” Bank of Commerce v. SouthGroup Ins. & Fin. Servs.,
LLC, 73 So. 3d 1106, 1110 (Miss. 2011) (quoting Weathers, 14 So. 3d at 694).
Two vanishing-premium cases inform this discussion. First, in Stephens v. Equitable Life
Assurance Society of the United States, the insured sued a life insurer and agent to recover for
fraudulent misrepresentation and concealment concerning vanishing premiums, which were
promised by the agent but excluded from the policy. 850 So. 2d at 78. After limiting the
contract to its terms, the court held that the contract unambiguously contradicted what the agent

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told the insured. Id. at 83. Thus, the claim accrued when the policy was purchased, and as a
result was time-barred. Id. (affirming summary judgment).
The second case, Weathers v. Metropolitan Life Insurance Co., also involved vanishing
premiums but reached a different result. There, the court examined its holding in Stephens,
summarizing it as follows:
We read Stephens to hold that if an insured is put on notice by the plain language
of the policy that the agent’s verbal representations are false, a fraud claim accrues
on the date of the sale. See id. at 81. This reading of Stephens is consistent with
our prior caselaw, namely, “‘[A] person is under an obligation to read a contract
before signing it, and will not as a general rule be heard to complain of an oral
misrepresentation the error of which would have been disclosed by reading the
contract.’” Ballard v. Commercial Bank of DeKalb, 991 So. 2d 1201, 1207 (Miss.
2008) (quoting Godfrey, Bassett & Kuykendall Architects, Ltd. v. Huntington
Lumber & Supply Co., 584 So. 2d 1254, 1257 (Miss. 1991)). On the other hand,
if the plain language of the policy does not clearly contradict the agent’s
representations such that the insured is put on notice, a fraud claim accrues when
the insured becomes aware of the misrepresentation. See Stephens, 850 So. 2d at
84–85. In other words, the discovery exception of Section 15-1-49(2) applies, so
that the statute of limitations begins to run when the insured discovers or should
have discovered the alleged misrepresentations.
14 So. 3d at 693 (footnote and other citations omitted). Applying this standard to the facts before
it, the Mississippi Supreme Court found a question of fact whether the policy language placed the
insured on notice. Id. at 694; see also Bank of Commerce, 73 So. 3d at 1111 (holding under
Weathers that ambiguous policy did not place insured on notice at time of sale but affirming
summary judgment based on subsequent notice).
This case is more like Stephens than Weathers. For starters, Plaintiffs’ entire case is
premised on the inconsistency between what Mims told Birdsong and what the contract actually
contained. As Plaintiffs themselves explain, the contract made “no express reference to the
bonus . . . .” Pls.’ Resp. [44] at 4. Thus, they are left arguing that the parties “understood and
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intended” that bonuses would be paid. Id. In fact, the alleged breach is premised on Defendants’
decision to reduce the non-guaranteed benefits for reasons not specified in extra-contractual
documents and statements. But as stated in Stephens, “[a]ny alleged oral agreement in this case
does not have any effect on the written insurance contract.” 850 So. 2d at 83 (citation omitted).
The closest Plaintiffs come to showing that the policy language did not clearly contradict
the agent’s representations is a footnote referencing a September 24, 1991 “Target bulletin.”
Pls.’ Resp. [44] at 4 n.1 (citing Ex. 3). Plaintiffs describe the bulletin—which was sent to
Mims—as revealing that the bonus guarantees would not be “expressly included with the
insurance policies.” Id. (emphasis added). If Birdsong was actually told that the policies would
exclude the promises Mims made, then receiving the policies would not place him on notice.
But it is not apparent that the bulletin actually conveyed that message. And even if it did,
Plaintiffs have not cited any evidence that Birdsong ever received the document or was told that
the policies would exclude reference to the bonuses. First, the bulletin was dated after Birdsong
applied for the policies. Second, although Mims testified that he relied on the bulletin to tout the
policies, he did not mention informing Birdsong that the policies would exclude reference to the
bonuses. Third, when Birdsong was asked in his deposition whether he had independent
recollection of having discussed the bulletin, he stated, “I don’t know. I don’t remember the
specifics of discussing it.” Def.’s Mot. [40] Ex. B, Birdsong Dep. at 62. 2

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Plaintiffs’ Memorandum did not reference the testimony regarding the bulletin, and
while the Court attempted to consider the record as a whole, it was under no duty to consider
testimony that was not specifically cited. Fed. R. Civ. P. 56(c)(3). If additional testimony was
inadvertently overlooked, it would not be considered at this point. Id.; see also Jackson v. CalWestern Packaging Corp., 602 F.3d 374, 379–80 (5th Cir. 2010).
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Finally, if the Court were to make the speculative leap and find that Birdsong knew
the policies would exclude reference to the bonuses, it would conflict with Birdsong’s
testimony that he read the policies and was surprised by the absence of any such language:
Q.

Dr. Birdsong, have you read the policy?

A.

I have not, at least not in the last 20 years.

Q.

The—I will represent to you that the policy and this document we’re
looking at does not address the bonus.

A.

And I agree with that.

Q.

Is that surprising to you?

A.

It is since that was discussed as a—to entice me into taking the
policy. Yet, when I got the policy, that’s not in the policy. That’s
surprising that the company did not have that information written in
there.

Id. at 38 (emphasis added). This testimony further negates the disputed fact that drove the
Weathers decision. By Plaintiffs’ own admission, the contract contradicted Mims’s
alleged representation. Birdsong was on notice when he received the policies, and the
claims are time barred. Stephens, 850 So. 2d at 83. 3

3

Even assuming Birdsong was not then on notice, other events before the statutory
window placed Plaintiffs on notice “that there [was] a possible problem with the insurance
polic[ies].” Bank of Commerce, 73 So. 3d at 1110. For example, Mims received notice in 2006
that the bonuses were being reduced. Defs.’ Mot. [40], Ex. L, 2006 Annual Policy Summaries.
See Great Am. Ins. Co. of N.Y. v. Lowry Dev., LLC, 576 F.3d 251, 258 (5th Cir. 2009) (applying
Mississippi law and concluding that letter sent by insurer to insured’s agent put insured on notice
that subsequent renewal policy would not provide wind coverage included in originally issued
policy).
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b.

Mississippi’s Borrowing Statue

Plaintiffs never adequately address why receipt of the policies in 1991 failed to
provide notice. They argue instead that notice occurred in Spring 2008. If so, the claims
are still time-barred because Mississippi would borrow Alabama’s two-year statute of
limitations. Miss. Code Ann. § 15-1-65. This holding requires two Erie guesses, and
given the ruling in the previous section, the Court is reluctant to proceed much further. It
will do so only to provide a complete record for appeal but will limit the Order to a
summary of the core holdings.
First, Mississippi would apply the center-of-gravity test to determine whether the
claims accrued in Alabama. See Jeffrey Jackson, Legislative Reform of Statutes of
Limitations in Mississippi: Proposed Interpretations Possible Problems, 9 Miss. C. L.
Rev. 231, 282 (1989). Second, Mississippi would adopt Section 192 of the Restatement
(Second) of Conflict of Laws because it has adopted other contract-specific tests from the
Restatement. See Zurich Am. Ins. Co., 920 So. 2d at 434 (noting that Mississippi has
adopted “section 188 governing contracts in general and section 193 governing casualty
insurance contracts”). Third, under § 192 Birdsong’s Alabama residence dictates applying
Alabama law absent a more significant relationship under § 188(2) of the Restatement.
See Restatement (Second) of Conflicts of Law § 192 cmt. c (1971). Fourth, the facts
occurring in Mississippi address subparts (a) and (b) of § 188(2), but the balance of factors
point to Alabama as the state with the most significant relationship because none of the
parties reside in Mississippi and Alabama is the place of performance, location of the
subject matter, and the domicile of the insured. Fifth, even if Mississippi chose to apply
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the outdated territorial approach of the First Restatement, Plaintiffs are factually incorrect
that the last significant event (i.e., notice) occurred when Birdsong returned to Mississippi
from Alabama for a highschool reunion. Though Birdsong saw Mims at the reunion,
nothing substantive was mentioned, and the evidence is undisputed that any problems with
the policy were discussed when Mims called Birdsong a month or two later. Defs.’ Supp.
Mem. [53] Ex. Q, Birdsong Dep. at 75–76, 80–82; Id. Ex. R, Mims Dep. at 100–02,
125–26; see also Restatement (First) of Conflict of Laws § 377, cmt. a, Rule 4 (1934)
(“[T]he place of wrong is where the loss is sustained, not where fraudulent representations
are made.”). Because the claim accrued in Alabama, Mississippi’s borrowing statute
applies, and the claim is time-barred even if notice occurred in Spring 2008 as Plaintiffs
suggest.
2.

Bad-faith Breach-of-Contract Claim

The parties agree that the borrowing statute has no effect on Plaintiffs’ bad-faith
breach-of-contract claim. Defs.’ Supp. Reply [55] at 12 n.10. But even if the claims are
not time-barred for having accrued prior to Spring 2008, Plaintiffs fail to establish that
Defendants breached any contract between the parties.
“Although styled a tort, an action for bad-faith breach of contract is created by
contract and requires proof of a breach of contract.” Schoonover v. W. Am. Ins. Co., 665 F.
Supp. 511, 516 (S.D. Miss. 1987) (citation omitted). “Where there is no breach of
contract, there can be no tortious breach of contract.” Williams v. Liberty Mut. Ins. Co.,
No. 2:10cv205-KS-MTP, 2011 WL 5183572, at *6 (S.D. Miss. Oct. 31, 2011) (citation
omitted).
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Here, no record evidence suggests that Defendants breached the written insurance
policies they issued to Plaintiffs. And while Plaintiffs argue that payment of the policy
bonuses as Mims represented “was a part of the bargain between the parties,” there is no
dispute that the written insurance policies lack any reference to the non-guaranteed policy
bonuses. Pls.’ Resp. [44] at 17; see Defs.’ Supp. Mem. [53] Ex. Q, Birdsong Dep. at 38.
Instead, the policies contain an integration clause, indicating that the policies and their
applications comprise “[t]he entire contract.” Defs.’ Mot. [40], Ex. H, Policies at
Lincoln/Birdsong000209. And the application likewise states: “The agent has no
authority to make, modify, alter or discharge any policy or the terms of this or any other
agreement with the company.” Id., Ex. G, Applications at Mims.Subpoena000120. Such
clauses are effective in Mississippi and
signal to the courts that the parties agree that the contract is to be considered
completely integrated. A completely integrated agreement must be
interpreted on its face, and thus the purpose and effect of including a merger
clause is to preclude the subsequent introduction of evidence of preliminary
negotiations or of side agreements in a proceeding in which a court
interprets the document.
B.C. Rogers Poultry, Inc. v. Wedgeworth, 911 So. 2d 483, 490 (Miss. 2005) (quoting Sec.
Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369, 372 (6th Cir. 1999) (citations omitted)).
Put simply, the alleged promise on which Plaintiffs rely was not a part of the “entire
contract” between the parties. As such, Plaintiffs have not established that Defendants
breached the insurance policies when they reduced the policy bonuses. Plaintiffs’ claim
for bad faith breach of contract therefore fails.

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B.

Motion to Strike

Defendants argue that Plaintiffs Affidavit from Mims, submitted in opposition to
Defendants’ Motion for Summary Judgment, should be struck because the testimony
amounts to an interpretation of the policies’ language and the legal effect thereof, which
are “question[s] of law for the court.” Amica Mut. Ins. Co. v. Moak, 55 F.3d 1093, 1096
n.5 (5th Cir. 1995). But the disputed portions of the affidavit actually highlight the fact
that Plaintiffs are asserting breach based on representations that were not contained in the
policies. In any event, the Court has granted summary judgment and the motion is
therefore moot.
IV.

Conclusion
The Court has considered all of the parties’ arguments. Those not addressed would

not change the result. For the foregoing reasons, Defendants’ Motion for Summary
Judgment [40] is granted and their Motion to Strike [47] is denied as moot. A separate
judgment will be entered in accordance with Federal Rule of Civil Procedure 58.
SO ORDERED AND ADJUDGED this the 17th day of October, 2012.
s/ Daniel P. Jordan III
UNITED STATES DISTRICT JUDGE

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